Friday, July 16, 2021
CapitalPress.com 7
Farmers plan to rein
in capital investments
By CAROL RYAN DUMAS
Capital Press
Negativity and uncertainty
in farm country showed up
in farmers’ plans for capital
investments in June as mea-
sured by the Purdue Univer-
sity/CME Group Ag Economy
Barometer.
The gloomier perspective
was driven by how producers
feel about their farm fi nancial
performance, said Jim Mintert,
director of the Purdue Center
for Commercial Agriculture.
That index fell 30 points
from May to June and 42
points from April to June,
he said during the latest “Ag
Barometer” podcast.
That suggests producers
were projecting crop prices to
continue to drop over the sum-
mer and be potentially weaker
at harvest, he said.
“This kind of spilled over
into the capital investment
index,” he said.
That index dropped from
65 in May to 54 in June (rel-
ative to a baseline average
index of 100). What’s inter-
esting is the reading is about
10% below June 2020. From
his perspective, the investment
environment today looks a lot
better than a year ago, he said.
“Yet the index doesn’t
really support that idea,” he
said.
Follow-up questions on
investments in farm equipment
and construction might shed
some light on producer senti-
ment, he said.
“What we seem to be pick-
ing up is people are a lot more
negative on the construction of
grain bins and buildings than
they are on farm machinery,”
he said.
The percentage of produc-
ers who plan to reduce invest-
ments in construction of build-
ings and grain bins was 61%
in June compared to 58% in
May. The percentage who plan
to increase investments in con-
Capital Press File
The Purdue University/CME Group Ag Economy Barometer — based on a monthly survey of 400 crop and live-
stock producers across the U.S. — declined sharply in June.
Producer optimism falls sharply
By CAROL RYAN DUMAS
Capital Press
Farmer sentiment about
the agricultural economy
took a big hit in June for the
second month in a row.
The Purdue University/
CME Group Ag Economy
Barometer — based on a
monthly survey of 400 crop
and livestock producers
across the U.S. — declined
sharply to a reading of 137
(relative to a baseline aver-
age index of 100).
The index measures
farmer sentiment on cur-
rent conditions and future
expectation. It dropped 21
points from May’s reading
of 158, which was down 17
points from April.
“I wasn’t surprised it
went down, but I was sur-
prised it went down as
much as it did,” said Jim
Mintert, director of the Pur-
due Center for Commercial
Agriculture.
Michael
Langemeier,
associate director of the
center, said he thought the
index might weaken a little
bit but not nearly as much
as it did.
“Given the strong prices,
I thought that would hold
the index of current condi-
tions up there a little bit. But
obviously I was wrong,”
Langemeier said during
the latest “Ag Barometer”
podcast.
Corn and soybean prices
were still strong by histori-
cal standards, but they were
weaker than a month ear-
lier, Mintert said.
“I think that probably
contributed quite a bit to the
negativity. … I probably
underestimated how much
that was impacting people’s
perspective,” he said.
Langemeier said he
thinks there are also under-
lying concerns about crop
prospects in some parts of
the Corn Belt and Great
Plains.
“I just think this gen-
eral notion of uncertainty
and possible price infl ation
is concerning to respon-
dents,” he said.
The index of current
conditions fell 29 points
from 178 in May to 149
in June, a pretty big drop,
Mintert said.
“The index of future
expectations fell as well,
but it didn’t fall nearly as
much,” he said.
That index fell 17 points
from 149 in May to 132 in
June.
Producers’ view of their
farm fi nancial performance
was really the driver with
respect to current condi-
tions. That index fell from
126 in May to 96 in June
and fell 42 points from
April.
That’s a big drop in that
fi nancial performance index
and a little surprising given
the relative strength in crop
prices compared with long-
term history, he said.
“This one surprised me
more than the fact that the
index of current conditions
declined as much as it did,”
Langemeier said.
There’s a lot of uncer-
tainty about return pros-
pects this fall, but they’re
still pretty good. That leads
him to wonder if producers
are thinking prices are not
going to be as strong this
fall and not as good moving
into 2022 as they were ear-
lier in 2021, he said.
Mintert said it’s import-
ant to remember the sur-
vey is asking produc-
ers how they feel about
their farm’s fi nancial per-
formance and not asking
them to look at their bal-
ance sheet or projected
income statement.
He suspects the decline
in commodity prices fueled
the decline in sentiment and
increase in negativity and
uncertainty relative to a
month earlier.
Also playing into the
lower barometer read-
ing are rapidly rising pro-
duction costs related to
consumer and farm input
price infl ation, increased
cash rental rates for farm-
land, increased labor costs
and strong prices for farm
machinery.
struction was 9% compared to
14% in May.
“If we look at farm machin-
ery, it’s a diff erent story,” he
said.
The percentage of produc-
ers who plan to reduce pur-
chases of farm equipment was
44% in June compared with
46% in May. Those who plan
to hold purchases constant
went up to 45% in June verses
40% in May. Those who plan
to increase purchases did fall,
from 14% in May to 10% in
June.
“But that’s a diff erent set of
numbers than what we’re see-
ing on buildings and grain bins
and maybe more supportive of
the kind of information we’re
picking up from people like
auctioneers who are reporting
very strong prices at farm auc-
tions for used machinery, tight
supplies of new equipment,”
he said.
Michael Langemeier, asso-
ciate director of the center, said
the breakdown on machinery
investment could change as
producers get closer to realiz-
ing a crop. If yields are close to
trend, producers will be more
positive about purchases, he
said.
“If prices stay where they
are currently at, I can’t help
but believe there’ll be quite a
few people that are constant
or increase their purchases this
fall,” he said.
One of the challenges is
trying to fi gure out if peo-
ple are holding back because
they can’t get new machinery,
Mintert said.
In addition machinery
prices are strong with not much
discounting being off ered, he
said.
“On the construction side,
one of the concerns has to be
the rapid run-up in construc-
tions costs,” he said.
Investment intentions are
also likely infl uenced by rising
input costs and increasing cash
rental rates on farmland.
Ste. Michelle Wine Estates sells for $1.2B
By MIA RYDER-MARKS
Capital Press
Ste. Michelle Wine
Estates in Washington state
has been sold by its parent
company, Altria Group Inc.,
to a New York-based private
equity fi rm.
The buyer, Sycamore
Partners Management, spe-
cializes in consumer, retail
and distribution investments
and has current holdings in
big name brands such as
Loft, Nine West and Sta-
ples. It bought the winery
in an all-cash deal for $1.2
billion. The transaction is
expected to close by the end
of the year.
At closing, the net cash
will be subjected to custom-
ary net working capital and
other adjustments, accord-
ing to an Altria press release.
From the brunt of the
pandemic, the winery expe-
rienced a drop in sales by
almost 11% in 2020, accord-
ing to Shanken’s Impact
Databank, which tracks the
wine industry. Revenue was
down $614 million for the
fi scal year.
But Ste. Michelle Estates
still ranked as the 8th largest
Capital Press File
The Ste. Michelle Wine Estates Cold Creek Vineyard east
of Yakima, Wash. The 800 acres is the company’s oldest
vineyard in Central Washington, dating back to 1973.
wine marketer in the U.S. by
selling 3.1 million cases of
Chateau Ste. Michelle and
1.3 million cases of their 14
Hands brand.
The sale is seen as an
important step in the growth
of the winery.
“The Ste. Michelle lead-
ership team and I look for-
ward to working with the
team at Sycamore Part-
ners and believe we are
well-positioned to drive the
next phase of our growth,”
said David Dearie, Ste.
Michelle’s president and
CEO.
“This is an exciting new
chapter for (Ste. Michelle
Wine Estates) and a signifi -
cant investment in the future
of Washington wine. We are
looking forward to seeing
them continue to grow and
thrive,” said Steve Warner,
president of the Washington
State Wine Commission.
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NOAA says watch for La Nina
By DON JENKINS
Capital Press
Forecasters are predicting
that the odds favor a La Nina
forming next fall, a climate
phenomenon linked to large
snowpacks and good irriga-
tion seasons in most North-
west basins.
The National Oceanic
and Atmospheric Admin-
istration issued a La Nina
watch on July 8, indicat-
ing conditions are ripe for
it to develop in the next six
months.
A La Nina has a 66%
chance of prevailing in
November, December and
January, according to fore-
casters with NOAA’s Cli-
mate Prediction Center and
at Columbia University’s
climate research center.
The forecast confl icts
with most climate models.
Averaged together, 25 mod-
els reviewed by forecasters
predict only a 34% chance
of a La Nina next winter.
Forecasters,
however,
are using their human judg-
ment. A La Nina reigned last
winter and historically one
La Nina follows another,
according to a statement by
NOAA.
The La Nina watch also
has support from a group of
climate models developed
in the United States and
Canada.
“I trust humans informed
by the models,” Washing-
ton State Climatologist Nick
Bond said.
La Nina generally brings
cool and wet winters to the
northern tier of the U.S. La
Nina winters are generally
warm and dry in the south-
ern tier of the U.S. Another
La Nina could worsen the
drought in the Southwest
U.S.
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